Markets Inch Lower With Eyes On FOMC; Oil Rises Defiantly

By Dimitra DeFotis

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For three of the last four weeks, markets have tumbled lower.

The Standard & Poor’s 500 Index declined 9.63 points, or 0.59%, to 1626.73 on Friday. For the week, the index was down 16.65 points, or 1.01%. The Dow Jones Industrial Average fell 105.90 points, or 0.70% , to 15070.18 Friday. It was down 177.94 points, or 1.17% for the week. The Nasdaq Composite inched 21.81 points lower, or 0.64%, to 3,423.56. It fell 45.66 points, or 1.32% for the week. More market index data here.

But put the volatility aside, and the S&P remains up 14% year to date and the Dow is up 15%. Expect more volatility next week: the Federal Reserve Open Market Committee on Wednesday afternoon will offer a policy announcement and updated forecasts. Fed Chairman Ben Bernanke speaks thereafter. It’s likely that “verbiage will be sufficiently opaque” so that interpretations won’t paint policymakers into a corner, writes MFR Chief Economist Joshua Shapiro.

Robert V. DiClemente at Citi Research writes that:

“The financial setting for next week’s FOMC meeting reflects an emerging reassessment of the outlook and its implications for monetary policy. We think officials will attempt to clarify that a pending decision to scale back asset purchase does not establish an end date for quantitative easing (QE) let alone a timetable for raising rates. Nonetheless, while the policy message may moderate the recent upswing in market rates, improving growth prospects suggest that it is unlikely to reverse the trend. We think a mid-September cutback in the pace of QE remains likely with an initial tapering concentrated in Treasuries.”

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